Ethiopia coffee export to increase by 560 metric tones – New Business Ethiopia

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From October 2022 to September 2023 Ethiopia’s coffee exports are anticipated to increase to a 4.72 million bags, a record (280,560 metric tones – MT) from 282,000 MT the previous year, says a new report.

According to the United States Department of Agriculture report, Ethiopia is expected to produce 8.25 Million 60-kilogram coffee bags (495,000 MT) during this time. Ethiopia’s coffee industry is home to more than 15,000,000 smallholder farmers. Last Ethiopian budget year 2021/22, Ethiopia’s coffee exports totaled 4.70 million bags (282,000 MT).

In 2020 and 21 Ethiopia’s top export markets were Germany, Saudi Arabia, the United States, Belgium, and Japan. In MY2021/22, 3.45 million bags (207,000), are expected to be consumed in local markets.

Production

The world’s first arabica coffee was introduced by Ethiopia. Even though delayed rains in southern regions were not noticed, they did have an impact on the harvest. However, the weather in 2021/22 was generally favorable throughout the year. There has been minimal insect and disease infestation in coffee growing areas.

Ethiopia is the world’s third-largest arabica coffee producer and the greatest producer of coffee in Africa as of 2022, with a production that has slowly increased from 6 million to over 8.15 million bags in the past ten years. The coffee seedling that was planted recently is now producing after being cultivated for five to ten year.

The production of coffee is anticipated to increase by 100,000 bags in 2022–2023 to 8.25 million bags (495,000 MT), assuming favorable weather, low insect and disease pressure, and sufficient rain. In comparison to our forecasts for 2019–20, which were 7.6 million bags, the estimate for coffee output in 2020–21 has been increased to 8.15 million bags.

The key factors behind the rise in production volume are the increased yields in the coffee producing regions, especially in the western and southern regions, and the introduction of new trees to harvest the beans. According to the report, the amount of rain and distribution pattern were normal to higher than usual during the MY 2020/21 bean growing season.

Coffee Berry Disease (CBD) is also being recommended by experts to coffee farmers.

Wet and sun-drying are the most popular methods of coffee processing. Currently, 20–30% of Ethiopian coffee is washed, and 70–80% is unwashed or sun-dried. In many areas, including the United States where consumers prefer “cleaner” cleaned coffee, unwashed coffee is sold for less money.

Japan and other nations insist on unwashed coffee for a more authentic taste. Ethiopia is the largest khat producer in East Africa. Khat, a bushy plant that is used to stimulate. Some regions of the nation’s farmers have switched from growing coffee to just khat in recent years.

It is banned in most countries, but legalized in Ethiopia and the neighboring countries. The transition has led to greater farmer incomes but also declines in food security, biodiversity, soil health, and women’s empowerment.

Although Khat is illegal in many countries, it’s legal in Ethiopia as well as its neighboring nations. Increased farmer incomes have been accompanied by reductions in soil health, food security, biodiversity, and women’s empowerment.

Ten coffee trees are required to produce the same amount of money that one pound of khat. Khat plants are more drought resistant than coffee and require less maintenance. A single coffee plant produces 8-12 kg of berries.

The Ethiopian government does not support khat production and does nothing to stop its growth, trade or use. GOE receives a significant sum through the local taxation and export of khat.

Ethiopia opened a cutting-edge coffee training facility in June 2021 to provide practice-based training that is modular in nature with the goal of improving the sustainability and value chain in the nation’s coffee sector. The facility is located in Addis Ababa, on the grounds of Ethiopian Coffee and Tea Authority.

The facility offers training courses about the principles of coffee processing, drying and storage, as well maintenance and trade. Four criteria are considered when Ethiopia exports coffee.
– Certification (e.g., Fair-trade)
– Coffee grade and coffee cupping tests.
– Geographical origin: from well-recognized geographical location in particularly Harar and
Yirgacheffe.
– Post-harvest treatment: sun dried or washed coffee.

These high-quality coffees account for 25% of all export quantities. They are sometimes referred to as specialty coffee.

Consumption: Ethiopians are among the continent’s biggest coffee drinkers, and the trend there is steadily increasing. According to forecasts (210,000 MT), 3.5 Million Bags of Domestic Coffee will be Consumed in MY2022/23.

Post anticipates 3.45 million bags of local consumption during MY 2021–2022. (207,000 MT). The majority of coffee purchased on the local market was rejected or did not meet the export quality requirements of the Ethiopian Commodity Exchange, ECX.

However, prices for arabica coffee are often higher in the local area than elsewhere. Ethiopians’ social and cultural lives depend heavily on coffee.

Coffee prices on the local market have been rising annually due to higher export coffee prices in the past two years.

Trade

The Ethiopia Coffee and Tea Authority report states that during the first half of the current fiscal year (2021/22), Ethiopia’s six-month coffee export earnings increased by $274 million to reach more than half a billion U.S. dollars.

Ethiopia exports over 1000 tons of coffee per day. According to the six-month income total, coffee is Ethiopia’s best-performing export.

In 2021/22, approximately 5% of coffee production will go to cross-border and black markets, with the remaining 42% going domestically. The remaining 58% is directed toward the export market, with 80–85% of that going through the ECX, 5–10% going directly through cooperatives, and the remaining 5% going through commercial farms.

Only in January 2022, Ethiopia sold about 11,200 bags (672 MT) of coffee online during the launch of Ethiopian coffee brands on China’s largest E-commerce platform, Alibaba (Tmall Global), as a result of collaboration with the Government of Ethiopia and the United Nations Economic Commission for Africa (ECA).

The frequent droughts and frosts that reduced the quantity and quality of coffee arabica production in South American coffee-producing regions are the main causes of Ethiopia’s rising coffee exports.

Policy

Many coffee traders used to export at a loss to earn more foreign currency. Then they would use that money for things like cars and building supplies which they would then resell in their local area at a large profit.

This approach led to a distortion in the prices of agricultural products on market, according the report. The Coffee and Tea Authority collaborated with the National Bank of Ethiopia on January 28, 2020, to create a policy known as the “Export Coffee Contract Administration.”

This directive establishes a minimum coffee export price based upon the global average price paid for coffee from different regions. This regulation will affect coffee farmers, coffee roasters, and exporters.

Coffee exporters deliver their contracts the Ethiopian National Bank (NBE). Each day’s contracts are given to an Association-team by the NBE. The team then compares the costs with global and local coffee pricing. The team then calculates a new minimum price by using an average weighted formula. Contract pricing for coffee exporters is based on the minimum price the next day.

Ethiopian coffee exporters must comply with the minimum coffee price regulations and sell their beans at a minimum price. If exporters offer less than the required price, the government and Ministry of Trade can take legal action.

NBE has issued a directive restricting how much foreign currency exporters can keep to use for purchasing other commodities from export earnings. This directive is in response to severe currency shortages.

This new guideline restricts import of other products and services. Most exporters use coffee export revenues to pay for imported goods and services. According to the guideline only 20% of the money coffee exporters earn through export can be kept in USD for their export.

To be used locally, any earnings that are not converted to Birr must be converted. This directive has been criticized by exporters, prompting movements to raise the 20% cap to protest the new rule.

Source: newbusinessethiopia

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